Will Housing ‘Misery’ Swing the Election?

By Quentin Fottrell

Investors and homeowners got mixed messages about the nation’s housing market this morning, with the National Association of Realtors reporting that existing-home sales in September were down 1.7% from August’s levels, while the median existing-home price was up 11.3% from the year-earlier level. That good-news-bad-news report increases the odds that the nation’s housing struggles could be a major theme in the home stretch of the presidential campaign — especially since several “swing states” that could play a crucial role in the election have particularly weak property markets.

According to the “housing misery” index compiled by online real estate marketplace Trulia and updated this week, sunshine swing states — essentially, Florida and the West — are suffering more than most. Nevada and Florida have the highest scores on the misery index, at 70 and 58 respectively, thanks to an overall decline in house prices and rise in delinquencies and foreclosures in both states since President Barack Obama took office in 2008. “They are key battleground states in the election homestretch,” says Jed Kolko, chief economist at Trulia. A third swing-state, Michigan, also ranks high on the misery index, with a score of 32.

(To create his index, Kolko combined delinquency and foreclosure data from market researcher CoreLogic and house price information from the Federal Housing Finance Agency. To define states as “swing” states or as solidly pro-Romney or pro-Obama, he relied on poll results aggregated at the website Real Clear Politics.)

Potentially better news for Obama: Of 11 swing states identified in Kolko’s survey, eight have what he defines as “moderate” or “low” housing misery. Iowa, Colorado, Wisconsin, North Carolina, Virginia and New Hampshire all fare decently on Trulia’s index. Ohio and Pennsylvania – two states widely regarded as critical for the candidates to take in order to win the overall election – are toward the middle of the spectrum, with scores of 19 and 14 respectively. In any state, a better real estate market benefits the incumbent, says Brandon M. Macsata, managing partner at the The Macsata-Kornegay Group, Inc., a consulting services firm in Washington, D.C. “Economic issues — including housing — remain front and center on the minds of the electorate,” he says.

Generally speaking, housing markets in states likely to vote for Obama or deemed “solid” Democratic states are weaker by Trulia’s measurement than Romney’s most secure states. Obama’s blue states have an average housing misery index of 32, compared with just 12 for Romney’s states. (The Obama average is driven up by California, the country’s most populous state, which leans solidly Democratic but has the country’s third most “miserable” housing market, with a score of 50.) “The differences are stark on every measure,” Kolko says. “Romney’s states have recent price increases, better affordability, and higher homeownership.”

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Pay Dirt examines the millions of consumer decisions Americans make every day: What to buy, how much to pay, whether to rave or complain. Lead written by Quentin Fottrell, the blog examines these interactions, providing readers with news, insight and tips on shopping, spending, customer service, and companies that do right – and wrong – by their customers. Send items, questions and comments to quentin.fottrell@dowjones.com or tweet @SMPayDirt.